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Bottom fishing may not be a good idea in the absolute near term

The markets witnessed a drop in traded turnover as the decline in values resulted in trader withdrawal en masse. The w-o-w turnover declined 12% on the MCX and the open interest rallied 7%. The biggest drop in turnover was seen in aluminium, ATF, platinum, crude oil, copper, mentha oil and silver. Nickel and zinc witnessed higher volumes as the bears hammered prices.

The open interest toppers were natural gas, nickel, mentha oil and zinc. Open interest dropped sharply in platinum, certified emission reduction and ATF. This week may see more drawdown as the outlook for hard assets has turned downwards on sizable unloading. Bottom fishing may not be a good idea in the absolute near term.

Agri commodities
Mentha Oil has seen stagnation at the Rs 775 levels as the huge upmove was followed by consolidation at higher levels. The immediate support will be at the Rs 675 level. Market internals indicate a 13% decline in turnover and a 29% increase in open interest.

Metals
Aluminium saw a sharp drop. The velocity of the fall since a fortnight and open interest readings indicate that the near-term outlook suffers from the prospects of significant overhead supply as upthrusts will face unwinding from trapped bulls. Bottom-fishing must be avoided. Market internals indicate a 44% decline in turnover and a 14% decline in open interest.

Copper has slid to near floor support at the Rs 332 levels below which a fresh decline to the Rs 325-328 band is possible. The increased open interest indicates a bearish build-up. As per advanced oriental charts, the outlook has not been completely vitiated to the disadvantage of the bulls. As long as the Rs 324 level holds, expect some bounce-back. Market internals indicate an 18% decline in turnover and a 5% increase in open interest.

Gold has seen a sharp decline after the Rs 13,300 support was violated. The Rs 12,600 level is the immediate threshold to watch out for, below which the next target for the drawdown is the Rs 11,950 level. To realise this target, the decline below the Rs 12,600 level must be on high volumes and increased open interest. Upsides will see resistance at the Rs 13,300 levels. Market internals indicate a 7% decline in turnover and a 9% increase in open interest.

Nickel has seen a clear violation of critical supports as the Rs 850 mark stands violated. The weekly charts indicate the lowest closing after the weekend of April 8, 2006, which is a bearish indicator. Market internals indicate a 9% increase in turnover and a 34% increase in open interest.

Silver has moved in tandem with gold and the immediate outlook is that of weakness as the Rs 24,750 support stands violated. The Rs 23,000-23,250 band needs to be watched and bulls need to defer their buy positions. Unless the Rs 24,750 hurdle is overcome on the upside, lay off purchases even for momentum trades. Market internals indicate an 8% decline in turnover and a 6% decline in open interest.

Zinc is near its multiple support at the Rs 76 levels. Should the metal decline below this on high volumes and expansion in open interest, expect a fresh decline. Upsides will be calibrated until the bulls take the counter past the Rs 86 levels on high volumes and open interest addition. Market internals indicate a 6% increase in turnover and a 12% increase in open interest.

Energy
ATF has declined with crude oil and may see pressure on all advances as the upsides are likely to be seen lock-step with crude oil. Since the outlook for crude is weak, further declines in ATF are possible. Market internals indicate a 46% drop in turnover and a 100% decline in open interest.

Certified emission reduction (CER) has retraced to near lowest levels in four weeks as unwinding was seen at higher levels. The near-term outlook is weak and unless the Rs 1,575 resistance is overcome, don’t expect a sustained upmove. Market internals indicate a 22% drop in turnover and a 7% decline in open interest.

Crude oil is precariously perched at the support level of Rs 5,200, below which the decline can take it to Rs 5,140. If the Rs 5,140 level is violated downwards, the fall can be steep. The upside resistance is at the Rs 5,550-5,575 band and unless this congestion is overcome convincingly, expect the upsides to be capped. Market internals indicate a 25% decline in turnover and a 6% decline in open interest.

Natural gas has seen a sell-off for the third week in a row and the immediate outlook is wedded to that of crude oil. The Rs 370 area is likely to be the immediate floor. Market internals indicate a 4% decline in turnover and an 89% increase in open interest.

Mandatory disclosure —Theanalyst has exposure to goldfutures recommended above
vijay@BSPLindia.com